This is an extract from a research note just completed by Alto...

This is an extract from a research note just completed by Alto Capital on DMG. At current levels its market cap is 5 times below this.

Final Thoughts
DMG is sitting on a potential 5 to 10 million ounce gold project at Lixian, with time and lots of drilling
required to determine its eventual size.
We believe DMG controls an extremely valuable asset in the form of the Lixian Gold project; however the
financial position of the company (low cash balance, $5m in debt including convertible notes) has made
it difficult for the company to progress the project as quickly as it would like.
While we believe DMG offers exceptional value, at current stock levels, we acknowledge that until
progress is made on either the funding front or a potential JV/sale of the Lixian project is announced, it is
difficult to see a trigger for the stock to rally.
We believe there are three potential scenarios for the group going forward; 1) outright sale of Lixian
project or company to a third party, 2) third party takes an equity position in the Lixian project or
company, and 3) initiate a substantial capital raising to enable the project to progress.
Based on the valuation attributed to its peers on the ASX, ignoring capital structures and financial
positions (which we acknowledge are very important), we believe that to the right party DMGs Lixian
Gold Project to be worth at least A$150m at present, and potentially up to A$450m A$650m once a
sizable production facility has been constructed and commissioned to produce 150,000 200,000oz per
annum.
With the price of gold now trading comfortably above the psychological US$1,000oz level and
consistently trading above US$1,100oz level we believe the gold sector is the place to be. Many investors
are currently basing their investment decisions on global themes rather than on the merits of individual
companys, with the switch out of US dollars into real assets (precious metals, commodities, etc) remaining
the major investment theme at present.
We forecast gold will continue to consolidate around the US$1,050/oz - US$1,150oz level over the coming
months, before potentially rallying to around the US$1,500/oz level by mid year.
To the right party (and using current gold price around US$1,000oz) we believe the Lixian Gold
Project to be worth at least A$150m, and potentially up to A$650m.